Ms. Darpin Shah, Institutional Research Analyst, HDFC Securities.
Significant treasury gains and strong NIMs buoyed RBK's 1Q earnings. While QoQ deposit growth was healthy, deposit granularity remains an area of concern. Moratorium trends in the credit card and micro-credit portfolios, where LGDs are high, are concerning. These segments could contribute disproportionately to slippages and LLPs. Provisions are likely to remain elevated in the near term, denting return ratios. This underpins our REDUCE rating. Our price target of Rs 148 remains unchanged.
1QFY21 highlights: NII grew 27.4/2% YoY/QoQ, and was 10% ahead of our estimates. PPOP grew 11.5% YoY but dipped 9.8% QoQ, led by a sharp 33.4% QoQ fall in other income, and was 3.9% below our estimates.
Deposits: After the significant outflow seen in 4Q, RBK witnessed a 6.8% QoQ growth in deposits. It was led by a 24.2% QoQ growth in SA and a 6% rise in TDs. Average deposits from retail and small business customers were 31% of deposits vs. 29.3% QoQ. Granular deposit traction remains an area of concern and progress on this front will be watched.
Moratorium: 13.7% of the bank's portfolio was under moratorium as of June (vs. 33% in April). The credit card and micro-credit portfolios have seen a reduction in the moratorium to 22% and ~35%. The credit card/micro-credit moratorium remains relatively sticky/elevated. These segments, along with the corporate portfolio (rated BB and below), are likely to keep slippages (4.3%) elevated in FY21E.
Non-tax provisions at Rs 5bn, dipped 18.6% QoQ but remained elevated (2.3xYoY). COVID-19 related provisions were Rs 2.4bn, (total COVID-19 provisions stood were Rs 3.5bn i.e. 62bps of loans). Commentary indicated that a majority of COVID-19 related provisions pertained to the credit card portfolio and that the management expects a 70-80% increase in credit costs for this book (5% at present). We expect LLPs of ~2.8% over FY21-22E.
Surprisingly, NIMs were flat QoQ at ~4.85%. CoF fell 30bps and yield increased 50bps to 13% (driven by 140bps rise in retail yields). We believe that current NIMs are unsustainable and expect a 45bps fall over FY21-22E.
Shares of RBL Bank Ltd was last trading in BSE at Rs.169.6 as compared to the previous close of Rs. 168.9. The total number of shares traded during the day was 892428 in over 7126 trades.
The stock hit an intraday high of Rs. 170.65 and intraday low of 165.9. The net turnover during the day was Rs. 150324348.